Posts Tagged ‘mobile commerce’

The honeymoon of the mobile application industry is over. The fight for users – and the challenge of building a sustainable flow of money from them – has arrived. And it will only get tougher.

Raise your hand if you have a smartphone. Now think about your friends, family and colleagues. More hands up, right?

The popularity of these devices has ballooned from 9 percent of mobile phone sales in 2009 to a projected 50 percent by 2013, according to Gartner.

Hardware manufacturers and service providers are having a great time trading up their users to higher-margin handsets and contracts.

But perhaps the greatest untapped opportunity afforded by the smartphone revolution belongs to a third party: the providers of mobile apps and mobile content.

In the balance

With only one small screen to navigate, the mobile user is a captive audience. However, as the number of competing platforms, channels and applications grows, and the fight for consumers’ attention intensifies, turning a mobile app into a sustainable, profitable venture will become increasingly difficult.

Will ad revenues alone be enough for app backers to achieve this sustainability?

For apps built around the freemium model, how will developers know and establish the right balance between paid and ad-supported users?

Where firms do decide to charge for their software, content and other features, what will the most successful pricing models look like?

Those are just a few of the fundamental questions facing someone who wants to make money with apps.

In 2001, our firm explored the challenges of selling content online. Back then, those who were brave enough to put a price tag on their offering based their decisions more on “gut feeling and guesswork than hard data.”

PayPal’s suit against Google claiming the latter misappropriated trade secrets reflects the urgency around being the first to market with a viable mobile payments solution.

Both companies are trying to build a presence for themselves in the growing mobile payments space, which industry believes has significant potential even though there are still a lot of unanswered questions about how it will work. In the suit, eBay-owned PayPal says it has been developing capabilities to provide large retailers with next-generation “mobile payment” point of sale technology and services and that Google is also exploring this market.

“I think the case has to be understood in the larger context of the rush to be the first to market with a viable mobile payments solution,” said David Carter, an attorney at ArentFox, NY.

“This is an area where the first-mover is going to have significant advantage,” he said.

“The fact that 50 percent of mobile device owners are willing to spend $100 or more is reflective of a broader trend that mobile commerce has moved beyond ringtones to much bigger-ticket items,” said David Staas, senior vice president of marketing at mobile advertising firm JiWire, San Francisco. “Mobile moving into the higher tiers means it is becoming a mainstream commerce platform and that’s an exciting trend to see.”

The report shows that mobile consumers are growing more comfortable shopping via a mobile device, with 84 percent of the mobile audience partaking in some sort of shopping behavior on a mobile device in the first quarter, up from 70 percent in the previous quarter.

This includes the 20 percent of consumers who researched and made a purchase from their device.

Luxury brands know better than anyone that affluent consumers are highly particular about the things that they purchase.

Whether it is this season’s new Christian Louboutin pumps or that straight-off-the-showroom-floor M Series BMW, affluent customers usually know exactly what they want. The same can be said for the ways in which they shop.

As early adopters who place value in being among the first to have a coveted item, affluent U.S. consumers are more likely to carry a smartphone or tablet.

When historians look back on this commercial and cultural period, they will likely describe it as a time when the barriers between the physical and digital experience began to erode.

One of the hallmarks of this period will be the blurring of the lines between marketing channels, and the convergence and evolution into something new.

Today, location awareness and mobility have added context to even the most ordinary actions, while social media and the mobile Web have added a layer of immediate human connection to seemingly straightforward commercial transactions.

About Future Case

Future Case is an aggregation space about mobile life, business modeling, marketing and branding. The content is chosen from a number of sites that are serious on their matter. Authors can contribute. Please contact Kees.

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